[I wrote this during President
Clinton's first term, following the fall 1994 elections. The Wall Street
Journal published it on its Op-Ed page, November 11, 1994. The
Reader's Digest subsequently picked it up for their February 1995
issue. I received tremendous positive responses from those two printings. When
people say the economy is as good as it gets, we should remember how good it
once was and could be again. JW]

"The Way We Were, and Should Be Again"by Jude Wanniski
The Wall Street Journal, November 11, 1994

"Why do you think President Clinton isn't getting credit for
the good economy?" a producer of CNBC's "Business Insiders" asked me as we
prepared for the show.

I asked the young man how old he was, and when
he replied "29," I told him bluntly that he was too young to know what a good
economy looked like — that you have to have lived in the 1950s and 1960s to
have experienced a good economy.

By a good economy I mean one that is
not only expanding, but is also employing the nation's human and physical
resources at a relatively high degree of efficiency. In my experience, in
these terms the U.S. economy has been contracting since the late '60s, and is
now nowhere near the levels reached earlier.

In the 1950-70 period, it
was the rule rather than the exception that an ordinary family, without higher
education, could sustain itself decently on the income of a single
breadwinner. In 1955, when I was 19, living in Brooklyn, N. Y., my father, who
had a sixth grade education, maintained our family of five on a wage of $82 a
week as a bookbinder. My mother taught us fairness and compassion; my father,
discipline and enterprise.

With my younger brother and sister, we
lived in a small apartment in a relatively new apartment building. The monthly
rent in 1954 was $65, utilities another $7-to-$10. We had a 1949 Plymouth
sedan that my father bought new for $1,200.

My first good suit, bought
for my 1954 high school graduation, was $30. In the summer of 1950, I worked
as an office boy on Wall Street, for 75 cents an hour, the minimum wage. In
the summers from 1951 to 1953, I labored in the bindery for $1 an hour, with
time-and-a-half for overtime.

College tuition in 1955 at UCLA was
$1,000 for an out-of-stater like me, only $60 a semester for a Californian. In
the snooty private schools, like USC and Stanford, tuition was reckoned at $35
per credit. Still, you could work your way through without help from parents
or the government.

I worked summers as a common construction laborer in
New York City for $85 a week, $83 after deductions for income tax and Social
Security. A skilled union carpenter or electrician made $125 per week in NYC,
$120 after payroll deductions. The scale was lower elsewhere n the country,
but so were consumer prices.

Working as a newspaperman in 1963 in Las
Vegas, Nevada, three years out of school, I earned $125 per week. I'd saved
$2,000 and bought an upscale, brand new three-bedroom home, with a two-car
garage on a quarter acre, carpeted throughout, with appliances, a half mile
from the center of town. It cost $20,000. The monthly payment was $120,
including principal and interest, taxes and insurance. A brand new tarter home
could be had for $12,000.1 bought a new Volkswagen Beetle for
$1,600.

The U.S. economy in these years was good, but still John F.
Kennedy won the presidency in 1960 with the promise of "Getting the country
moving again" after the sluggish Eisenhower White House years, in which living
standards were thought to be rising too slowly. The economy boomed in the wake
of the Kennedy tax cuts, which brought le top income tax rate down from 91% @
$100,000 to 70%.

Where did this good economy go? The primary answer is
that it was inflated away. The price of gold, as a proxy for the prices of all
commodities, was $35 in those years. It is at roughly 10 times that level day.
In order to appreciate the numbers related above, you simply multiply by
10.

There is a secondary answer, though, which is that the inflation
caused the entire work force to be moved into higher tax brackets, with
consequent reductions in after-tax purchasing power. That is, my father's
bindery job in 1954 paid $82 per week, with $80 after deductions; today, at
$820 per week the net would be $662. A carpenter's $125 before deductions was
as good as $1,200 today before payroll taxes, but the net pay check was then
$120; it's now the equivalent of $91. The average income of professionals —
doctors, dentists, etc. - was $200 per week, $10,000 annually.

The
$20,000 house now costs at least $200,000, but with interest rates and
property tax and wages being what they are, it's way out of the reach of young
people just out of college, not to mention high school.

Capital was
plentiful. When you sought a loan at the bank, if you looked like a good bet
the lending officer would offer more than you thought you needed, at 4 or 5%.
If you had physical collateral, your interest rate would be even lower. There
was no inflation. Money was as good as gold, at $35 the ounce.

Capital
was also plentiful because the gains of capital were lightly taxed for most of
the work force. To pay the top tax rate of capital gains of 45% you had to be
earning more than $100,000, which is the equivalent of $1 million today before
taxes. Today, with capital gains not indexed against inflation, you can hit
the top rate of 39%, the combined federal/state rate in California, at not
much above the minimum wage.

To ordinary people, the economy doesn't
look very good at all. After-tax incomes continue to decline in purchasing
power. The jobs offered in the unemployment ads pay close to the minimum wage
of about $5 an hour, which, after payroll deductions, yield $4 an hour.
Compare that to the plentiful minimum wage jobs of the 1950s and 1960s, when
75 cents was worth $7.50 before and after taxes.

The difference, then
and now, goes beyond the time warp of inflation. Thirty and forty years ago, a
small percentage of the work force was employed as lawyers, accountants,
regulators, bureaucrats, social workers. A member of Congress made $15,000,
but did most of what was needed to do in half a year, with a staff one tenth
the size he or she has today.

The elections Tuesday are a primal scream
from the voters about the terrible inefficiency of our national government,
its tax maze and its monetary uncertainty. As long as there was a Cold War,
the people put up with all this inefficiency. Now they say, it's time for
fundamental change, to put things back they way they should be.

It's
not too much to ask to get moving in that direction, a direction other than
the one suggested by President Clinton these past two years. It should be no
wonder he is not getting credit for the economy as it exists today. By past
U.S. standards, it stinks.